Consider the Following Guidelines When Purchasing a House Using a Home Loan


It’s a dream of many to own a house. With skyrocketing real estate prices, it might not be possible for everyone to save enough money to buy a house.  Thankfully, there are home loans.

Home loans help you purchase your dream home without draining your savings. Once you have your house, you can easily repay the amount in instalments. If you have been planning to purchase a house using a home loan, below given guidelines can help you go through the process without any hassles. 

Here are a few thumb rules to consider:

  • Decide the budget

You might get a loan of a few crore rupees as per your eligibility, but such an amount might not be financially feasible for you. Therefore, before you start the process of a home loan, fix a budget. Assess your liabilities and expenses and then decide the loan amount you should avail based on the cost of your house as well as your affordability. You can use a home loan EMI calculator to help you with the estimation. 

  • Keep a short tenure

Having a longer tenure indeed lowers your EMI amount. However, a longer tenure increases the interest burden and thus your cost of borrowing. Instead, try to take a home loan with a short tenure. It might lead to a higher EMI payout, but it will help you close your loan faster and thus save money.  

However, before choosing a tenure, you should consider other obligations to avoid any unnecessary pressure on your daily budget. 

  • The 35/50 rule 

Experts opine that you should follow the 35/50 rule while taking a home loan. This means that the EMI of your home loan should not exceed 35% of your monthly income. While your total EMI (personal loan, credit card, etc., if any) should not exceed 50% of your total monthly income.  

  • Keep a check on credit score

Credit score indicates your creditworthiness. A credit score of 700 and above is considered a good credit score for availing a home loan. A good credit score helps you negotiate better with the lender in terms of interest rate and loan amount. It would be best to check your credit score before applying and defer availing a loan if you have a low score. You can increase your credit score by paying your dues timely and maintaining your credit utilisation ratio to 30% or less. Once you have a satisfactory credit score, you can proceed with the application process. 

Ensure that you are well aware of all the aspects of your loan agreement when availing a home loan. Read the fine prints carefully and know about all additional charges. Also, keep an eye on home loan interest rates, as you can transfer your loan if you find a lender with a lower interest rate. Moreover, ensure to pay your EMIs on time. Any default can adversely affect your finances.